In this episode of On the Record, brought to you by Associated Equipment Distributors, Deere Director of Investor Relations Josh Beal told JP Morgan analysts that the OEM is confident it will be “producing to demand” in fiscal year 2025. In the Technology Corner, Noah Newman visits with Dave Thompson, a precision farming specialist with Johnson Tractor. Also in this episode, dairy is proving to be a bright spot for ag equipment sales and used equipment pricing continues its downward trend.
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Deere Confident on ‘Producing to Demand’ in Fiscal Year 2025
Deere & Co. remains confident about producing to demand during fiscal year 2025, JP Morgan (JPM) analysts reported following a virtual meeting with Deere Director of Investor Relations Josh Beal in early October.
JP Morgan analysts expect Deere’s North American production could be down 10-15% next year with pricing flattish, which they said would drive decremental margin down to the typical 25-40% vs. the greater than 40% seen during fiscal year 2024.
According to the report, less than 50% of the field inventory of 100+ horsepower tractors in North America are Deere units, which is lower than Deere’s overall market share in the region, JPM reported.
North American large ag equipment inventory remains a cause for concern, the JPM analyst said, which could drive OEMs to under produce vs. retail at least through the first half of 2025 before retail sales “start lapping negative comparisons in the second half of the year.”
The analysts also expect Deere’s high decremental margin to improve in fiscal year 2025, largely due to adjustments from its peak production levels. Those adjustments are based on layoffs and factory disruption inefficiencies, “compounded by significant wage inflation in North America from the 6-year UAW agreement,” they said. They added, “However, next year is expected to see more stable production levels, reducing inefficiencies, while the UAW contract’s step-up year in 2024 will not repeat”
Dealers on the Move
This week’s Dealers on the Move include Acme Equipment and Champlain Valley Equipment.
Kubota dealer Acme Equipment, a division of Acme Tools, has acquired the Kubota dealership rights for the Bismarck/Mandan region in North Dakota from North Plains Equipment in Mandan, N.D. Acme Equipment is converting an existing building to house the new location. This is the dealership's 6th Kubota location.
New Holland and Kubota dealer Empire Tractor notified customers that it is merging with Vermont-based Champlain Valley Equipment, effective Nov. 1. Empire Tractor operates 5 stores in New York. The combined organization will have 11 stores in Vermont and New York. All stores will operate under the Champlain Valley Equipment name.
Technology Adoption Barrier: ‘Purse Strings Have Tightened’
Some precision specialists can start catching their breath as harvest season begins to wind down.
Last week, I shadowed Dave Thompson in Amboy, Ill. He’s a precision farming specialist with Case IH dealer Johnson Tractor. He tells me most of his customers were done with harvest by the middle of October. Dave says they’re way ahead of schedule, and he’ll be able to focus a little more on sales now with the extra time on his hands. I asked him, what’s the biggest hurdle you have to clear when selling new technology to customers?